Economists say MM Lee’s 3% growth forecast for 2010 is cautious

Source : Channel NewsAsia – 9 Nov 2009

Singapore’s economic growth for next year could be as high as six per cent, say some industry experts.

They say the three per cent outlook given by Minister Mentor Lee Kuan Yew on Sunday may be on the cautious side, but it is still news they welcome as this means better times are ahead – more so in industries such as the finance sector.

“There will be a pay revision. Estimates in general range from about two per cent to about 4.5 per cent,” said Gary Lai Wai Keat, manager of Financial Services at Robert Walters. “If you look at the front line business, you talk about bonuses being restored.

“I think most of the bonuses that were cut is probably in the range of 60 per cent to 80 per cent. This year, you will get at least half of that coming back into the picture.”

Halimah Yacob, deputy secretary-general of NTUC, said: “With economy on the growth, it means workers can expect at least some bonuses and wage increases, compared to this year where many did not have wage increases, and many did not get their mid-year bonuses.

“We really do hope that with the three per cent projected growth, that would actually bring benefits to workers in terms of more job openings and some wage adjustments and bonuses that they can expect.”

However, analysts expect employers to remain cautious and adopt a wait-and-see approach when it comes to pay increments and bonuses for certain sectors such as manufacturing

“It will still be riddled with uncertainties, one of which, whether there will be an overhang in capacity,” explained Vishnu Varathan, a regional economist. “And to that extent we will not probably see a very broadbased upside to salaries and it may be better for the medium term if there’s a period of stabalisation and gestation, just simply due to the amount of uncertainty that is out there.”

But as the recovery takes shape, there are still traps lurking, which policy makers need to pay attention to.

Varathan said: “Over the next few months, there will be talk about exit strategies, to what extent and what pace will some of these policies begin to unwind. This is one of the risks that someone moves too fast or too slow and that’s going to cause de-stabalisation.

“You also see huge flows coming into this region and propping up the asset markets and partly due to dollar debasement fears as well. That, of course, is a very unsettling thing when the fundamental economies are at a very nascent stage of the recovery.”

Lai said: “Credit card debt is also being considered as the next big thing, whether the banks will have a much higher NPL (non-performing loans) going forward. Whether banks have accepted TARP (Troubled Asset Relief Programme) money and, if they can recruit talented people to join. These are things which going forward probably affect trade.”

Besides economists looking to a better year ahead, global leaders at the APEC Forum will also be looking at better understanding what the new world-economic order means for the region.